The third quarter of the year was both exciting and stressful for most of the crypto community. While both BTC and ETH had positive quarters, the big winners came from the newer protocol. In fact, smart contract platforms are growing even faster than the market in general, including projects like Solana, Avalanche, and Terra. All of them are up at least 300% on the chart.
SOL 4 Hour Price Chart | Source: Tradingview
While the Ethereum network was booming in new user adoption, largely due to the phenomenal growth of NFT, it also struggled over the year due to record transaction fees. The evidence is that for the third quarter alone, the total fee was $ 1.96 billion.
This has facilitated the development of competing smart contract platforms and “Ethereum killers” like Solana and Avalanche as users look for alternatives with lower fees than Ethereum.
In particular, SOL’s price rose to nearly $ 200 in early September when the ETH’s average transaction fee hit $ 55.
ETH price and average fee table | The source: Coin codes
With ETH’s SOL price and average transaction fees peaking around the same time, many speculated that the SOL rally was powered by Ethereum.
Natural growth dynamics
The August-September rally is dubbed “Solana Summer” by many in the market when the altcoin price hit $ 200, up from a modest $ 2 at the start of the year. On the flip side, SOL is consolidating significantly after the ATH of USD 215 as the market is overwhelmed by pessimism. This further feeds speculation that the SOL rally was due to Ethereum.
However, Solana’s upward movement turned out to be much more natural than expected. In particular, Solana’s DeFi projects topped $ 3 billion in September this year. The sharp increase in the number of projects on Solana has proven that it is capable of becoming a formidable competitor to Ethereum and other “Ethereum killers”.
Solana is also leveraging the NFT craze to drive development as an interoperable blockchain platform. In fact, NFT hit a $ 1 billion market cap on October 2nd on SOL.
While the SOL spot market has a low volume and lower price expectations, the futures market shows good prospects. Open Interest (OI) has been higher in the past few days, suggesting an increase in the number of outstanding contracts held by participants.
This also underscores that new capital is flowing into the market.
Open contract | The source: Coinlyze
There is still a risk
The Solana market has been unfavorable lately, but for the longer period the altcoin has held up high resistance at $ 164. Additionally, positive news like Ubeswap announcing a partnership with Allbridge to bring both Solana’s native SOL asset and Saber SBR governance token to Celo, gives the altcoin the social boost it needs regardless of the price range.
However, at the time of writing, SOL’s Sharpe Ratio has gone into negative territory and hit July levels while volatility has also decreased. The Sharpe ratio appears to show the performance of riskier SOLs versus a “risk free” asset over a period of time.
SOL Sharpe Ratio Chart | The source: Messari
While bullish price could reverse this as of press time, the SOL is unlikely to see any sustained rally anytime soon.
However, Solana’s growth was too strong to be ignored. In addition, the cryptocurrency remains in 7th place despite the consolidation price. While the daily and weekly gains are currently slightly negative, they could come back stronger as the altcoins really rebound.
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According to AMBCrypto